As mentioned before, there could be a major housing cut-off in China in the future, and it looks more likely to occur in the north at the moment.
One
Like the suburban areas of Beijing, Tianjin, Shijiazhuang, Qingdao, Jinan and many cities in the northeast, a 30% drop in housing prices is considered good, and many of them have been cut off. The cost of continuing to hold the property is very high, it is better to cut off the mortgage and dump the house to the bank to be cost-effective.
It was always speculated at the Time that after the mortgage was broken, the homeowner would dump the house to the bank, so that both the number of foreclosures and the bank’s bad debts would rise, which would pose a huge risk to the CCP banking industry. But as it stands now, I’m also missing a scenario where these homeowners who break their mortgages start to give away their homes for free in order to get the recipient to pay for them. Such things are really starting to happen now, and they are generating a lot of buzz on the domestic web.
Recently, a news about “free property in Yanjiao Tianyangcheng” started to circulate on the internet, which has aroused greater concern. The news was verified by the relevant departments and the media as true. The owner of the house, whose screen name is “thick earth”, is ready to give away the 40 square meters of the house in Yanjiao, Hebei, to others.
The picture is the “Tianyangcheng” district in Yanjiao, Hebei (online photo)
In the industry’s view, since most Home buyers have a need for self-occupation, and the cost of buying and repaying a home is generally high, there is a high probability that Yanjiao will not see a large area of abandoned homes and broken mortgages, but the state of the market at a long-term low point may be difficult to change. At present, houses in Yanjiao are generally down about 40% from the high point, which is basically the down payment being dropped out. The average price of Yanjiao Tianyangcheng, which peaked at over 30,000 yuan, has fallen to less than 18,000 yuan per square meter, a drop of 12,000 yuan, or 40%.
Recently, the netizen “thick earth” again posted about the details of the house: “The house is the apartment building No. 2 in Tianyang City, bought in 2016, 40 square meters, still more than 700,000 loans, now considered unable to pay the mortgage, but currently not cut off, if you are willing to bear the transfer costs and return travel expenses, can If you are willing to bear the cost of transfer and return travel expenses, you can do the procedure at any time”. In fact, 2016 is not the highest point of Yanjiao’s house price, the highest point appeared in 2017. This means that if you buy a house in Yanjiao in 2017, you may lose even more money now.
The reason why he chose to give it away for free was because he was “insolvent”. He bought the house as a wedding house, but didn’t live there much after the purchase, and left Yanjiao to settle in Yunnan in 2017. As a result, the house has been rented out, and the rent is “not worth much, more than 1,000 yuan per month.” He said his monthly payment is about 4,000 yuan, the reason why he wants to give it away, the problem is not whether he can afford the monthly payment, but more and more to lose, “I have taken in more than 400,000, if I pay it back again, I will lose more.”
The current unit price of Tianyangcheng is only 17,000 or 18,000, the house is not paid off the loan, basically and the market price is equal. For those who are eligible to purchase a home, it may not be appropriate to accept the gift and continue to pay off the loan; for those who are not eligible to purchase a home, it is still possible.
Yanjiao, a satellite city known as “Beijing’s supernumerary”, is only 30 kilometers away from Beijing’s CBD, and has taken on a large amount of Beijing’s overflow population and housing demand in recent years. In the past few years, Yanjiao has seen a rapid expansion of real estate, especially with the synergistic development of Beijing-Tianjin-Hebei, the overall relocation of Beijing’s urban sub-center to Tongzhou, and rail transportation, which has led to a wave of rising housing prices in Yanjiao. “At the time of the purchase of this home, Yanjiao’s house price was around 20,000 yuan per square meter, while at the peak of the market, Yanjiao’s house price exceeded 30,000 yuan per square meter.
In 2017, Yanjiao’s property prices were regulated so that the property market in Yanjiao, which was already in a depressed state, tended to freeze. It took three years of adjustment before Yanjiao’s new commercial residential transactions picked up. 2020 saw an overall average transaction price of 19,701 yuan per square meter, a slight increase of 1.9% year-on-year. But it is far below the pre-control peak of 30,000 per square meter. And there is no upside potential in sight.
The question is, is the situation of giving away houses for free representative? Does this mean that Yanjiao will see a large area of abandoned houses and broken mortgages?
Officially, of course, from the point of view of maintaining stability, the fact that Yan suburban home buyers are showing up to give away their properties is a case in point and does not mean that all properties on the market are in an illiquid or unattended situation. But we only need to look at the situation where Yanjiao’s property prices are falling by 30%40% at every turn, or even declining, to see that such a situation, while currently an isolated case, may not be an isolated case in the long run. It will become a widespread phenomenon like a virus, spreading around the Beijing area, and even throughout the north.
There are several reasons for this.
First of all, housing prices, as a representative of asset prices, are a typical reflection of the local economy. Now both the two major economic centers in the north, like Beijing or Tianjin, can be said to have very bad economies, with Tianjin falling out of the top 10 mainland cities in terms of GDP for the first time in decades, and the economy of the northeast falling from about 15% of the mainland economy decades ago to 5% now, such an economy, of course, cannot support the current housing prices. After peaking in 2017, it is normal to keep falling gloomily to the current level of the waist.
Secondly, the population of the north has been in the outflow of these years, the number of population is decreasing, demand is also decreasing, then of course, house prices also lost support.
Again, after the fall in house prices were set, when many buyers thought it was only temporary, sooner or later will go up. But four years have passed, the price of housing has not improved, but also let many buyers despair. The initial down payment has fallen, and the remaining loans to be repaid and the current market price is similar. Whether the mortgage is cut off or gifted to someone else, it is arguably a wise choice.
Finally, if the employment situation continues to deteriorate in the future and incomes fall or disappear, widespread mortgage breaks or house giveaways may become more common. Of course, the person receiving the house must take over the loan along with it, thus avoiding such a stigma as being blacklisted on credit for breaking a mortgage. If no one wants to give away a house in the future, and no one has a reason to take on the remaining mortgage, it may be that time that is the highlight of the mortgage break.
Two
When it comes to the impact of mortgage breakage on banks, here is just one bank introduced measures that have caused a lot of concern.
The other day, the six major banks officially announced: March 1 onwards, depositors of fixed-term deposit, to demand interest calculation. I don’t know if the whole headline is too powerful, or this deposit of fixed-term to give demand interest is too incredible, this news has caused a huge reaction at home and abroad, as is a typical of the banks began to play scoundrel to criticize.
Check the news, things do have this thing, overall the meaning is similar, but the point of time to start the implementation and the specific connotations of which are still different, here to tell you.
In fact, on December 15 last year, the six major state-owned banks of industry, agriculture, China, construction, transportation and postal storage issued a joint announcement to adjust the personal deposit products that depend on the grade interest. The six major banks said that according to the relevant regulations of the Central Bank of China on the management of deposit interest rates and interest calculations, from January 1, 2021, for early withdrawal of large individual certificates of deposit and time deposit products that bear interest against the file, the interest rules applicable to early withdrawal will be adjusted.
This “reform” of the six state-owned banks is too dark: time deposits pay interest on demand (network photo)
Specifically, if the user withdraws early after the adjustment date (inclusive), the interest will be calculated according to the bank’s RMB demand deposit listed interest rate on the withdrawal date; if the user withdraws early before the adjustment date (exclusive), the interest will still be calculated according to the original way; if the user does not withdraw early, the interest will not be affected.
Maybe hear here, we still do not quite understand, what is the meaning of this?
In order to let the depositors better save money, the bank launched the “interest on file” plan. The “interest on file” means that, for example, if you deposit regularly for 3 years, if you need to take it out at the end of 2 years, you can still liquidate it with the interest of 2 years’ deposit. If you deposit for 3 years, you can use the interest rate of 3 years. This method is more flexible and does not cause losses to the bank or the depositor, so it has become popular among depositors in the past few years.
For example, if a depositor has 200,000 yuan in deposit, he can deposit for 3 years and get it out after 1 year and 6 months, and then the interest will not be calculated according to the demand, but generally 1 year at the large deposit rate and 6 months at the demand rate. So welcomed by the depositors, also become the bank’s tool to attract savings. But now that the new rules are out, this fixed deposit product will have to say goodbye to everyone. Similarly, when you plan to deposit 200,000 fixed deposits, if you also take it out after 1 year and 6 months, it means that you can not get the 1 year fixed interest before, all can only take the demand interest, the loss is relatively large.
So what is the meaning behind this measure reform? As I said, all reforms are in favor of the government and state-owned enterprises, and few reforms are in favor of the people. This one reform can be said to be the very obvious one, which is to deprive depositors of their interests and save banks’ costs under the banner of combating competitive solicitation.
We know that the central bank now lending banks interest rates to the death, LPR floating rates have not been raised for almost a year, mainly to prevent the rise in lending rates led to monetary tightening effect, the real economy and the precarious debt to form a suppression. Banks are living on interest rate differentials, and now that lending rates are restricted to death, they can only rely on lowering the cost of collecting deposits to increase profits and maintain the more difficult days. This is the main reason for this rogue, the interest paid on fixed-term interest as demand. Of course, it may also be the bank in order to time window to prevent the mismatch of funds to the bank brought liquidity risk, this is also possible.
To say that the banks are now very difficult days indeed, last year Li Keqiang pressed the banks to give 1.5 trillion profits to the entity, which is actually the banks instead of the government, the responsibility of subsidizing industry.
The result of this subsidy, of course, is that the banking industry’s bad debt ratio rose significantly in 2020, while profits fell significantly. Now the annual report data of the major banks are not yet available, but the quarterly data of the first three quarters are already clear. For example, in the first three quarters of 2020, ICBC’s profits fell by 9.15% year-on-year, Agricultural Bank fell by 8.49%, Bank of China by 8.69% and CCB by 8.66%. There is no doubt that this is the result after taking the responsibility of subsidizing industry.
So, this time, the reaction of banks to give demand interest on time deposits is that banks are having more and more difficulties in making profits and are unashamedly cutting costs to stay alive. I wonder if it will be a fatal blow to the banks if the people who broke their mortgage payments dump their houses directly to the banks after no one picks up the gift houses similar to Yanjiao in the future?
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